Global Economy in H2-18: Is the
party over?
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Entering H2-18, the harmonized global growth of
last year is fizzling
out amid trade tensions between the US, China and most of the advanced
economies. Economies of commodity-exporting
countries are poised to strengthen as demand and supply dynamics continue to favour
gradual uptick in prices.
However, policy normalization in the
US is rattling financial markets with currencies of emerging and frontier
economies taking the most hit. According to the World Bank’s mid-year revised projections for 2018, 45.0% of countries are
expected to experience further acceleration compared to 56.0% in 2017.
Furthermore, growth in advanced
economies is expected to moderate slightly to 2.2% in 2018 (from 2.3% in 2017),
as fiscal stimulus in the United States offsets lags in other areas. Meanwhile,
growth in commodity-exporting
emerging market and developing economies is expected to strengthen as commodity
prices trend higher. As such, global growth is projected to remain flattish at
3.1% in 2018 and moderate in the next two years to 2.9% by 2020.
Sub-Saharan Africa (SSA): Slow
growth amid rising challenges
In H1-18, SSA growth was restrained by poor momentum in Nigeria
and South Africa (as at Q1-18)
despite higher commodity prices, sustained global growth and increased fiscal
stimulus. During the period, major economies in the region (Nigeria, South
Africa, Kenya, Ivory Coast, Ghana, Angola, and Senegal), all approached the
Eurobond market, issuing a total of $15.2bn. However, foreign exchange conditions
weakened against the US dollar as portfolio funds reversed on the back of
rising U.S treasury yields. A major milestone for the region during H1-18 was the endorsement of the African Continental
Free Trade Area (AfCFTA) by 44 of
the 55 African Union member countries, to promote intra-African trade and accelerate regional integration. That
said, economic outcomes were divergent across the region as output recovery in
Nigeria moderated in Q1-18
owing to relapse in critical non-oil
sectors.
Also, despite clarity in the
political climate, South Africa recorded a broad-based slowdown in Q1-18
as GDP growth eased to 0.8%y/y driven by an underwhelming performance in the
manufacturing and mining sectors. In H2-18,
the build-up to 2019 election in Nigeria,
upticks in commodity prices and weak policy implementation, are the key factors
to watch. Nonetheless, the ratification of the AfCFTA by individual member
countries portends a positive outlook for the region beyond 2018.
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